Mr Basil is confident the new agreement will ensure corrupt officials from both governments are held responsible and prosecuted.

"I know that it will build confidence of PNG citizens and the receipients of the aid money and expatriates of Austraia that we are doing something about corruption, to address the claims that have been made by the public of both countries," he said.

The agreement will cover allegations of fraud activities by any Australian personnel under any AusAid program, or situations in which PNG government departments misuse aid funding from Australia.

"It will make sure that all the fundings are used properly and appropriately," Mr Basil said.